Options Trading News

A large call spread is looking for a moderate pop in shares of Bed Bath & Beyond.

A trader bought 9,200 June 70 calls for the ask price of $1.63 and sold 18,400 June 72.50 calls for the bid price of $0.75, according to optionMONSTER systems. This is new positioning, as the previous open interest at each strike was below 200 contracts.

This bullish vertical spread cost the trader just $0.13, which is the amount at risk if shares remain below $70 through expiration mid-June. The maximum gain would come with BBBY right around $72.50, but above that level the trader is effectively short shares. The trade is also known as a ratio spread because one strike has twice as many contracts as the other. (See our Education section)

BBBY gained 1.94 percent yesterday to close at $68.39 after reaching a high of $69.33 earlier in the session. Those are the stock's highest levels since mid-September. Shares home-products retailer were below $57 at the start of March.

More than 33,000 BBBY options changed hands on the day, compared to a daily average of 4,800 contracts.

So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

optionMONSTER® provides stock market insight, advanced options education, and actionable trade ideas to meet the needs of do-it-yourself investors. After spending decades in the trading pits of Chicago, Jon 'DRJ' and Pete Najarian founded the company in 2005 to help people better manage their own investment portfolios.

OptionsHouse is separate from but affiliated with optionMONSTER®. Both are subsidiaries of Aperture Group, LLC.

All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on an evaluation of their financial circumstances, investment objectives, risk tolerance, and liquidity needs.

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